The Nasdaq has begun to diverge from the S&P 500, now up 4% since the July 8 followthrough.
Earnings were the clear driver for this index, with AAPL, FB, GOOGL and AMZN
all reacting positively to their respective results. Additionally, we have seen the Biotechs
bottom, with momentum now beginning to build throughout Health Care. We recommend
focusing on both Health Care and Technology as each of those sectors are sharply turning on
a short-term relative basis, and both carry strong fundamental growth. There remain very little
signs of weakness, despite general anticipation of a pullback. As long as support levels hold
and distribution remains muted, we will continue with our bullish stance. The market remains
in a Confirmed Uptrend.
Author: Neeraj Khanna
European Focus Long
The European markets traded with minimal volatility this week,
closing almost flat on average. Many of the indices are finding
resistance around their 40-week moving average, and those trading
above it are unable to move into new highs for the year. Four
countries, Portugal (+1.9%), Germany (+1.8%), France (+1.1%)
and Denmark (+1.0%), gained over 1%. Two countries, the
Netherlands (-1.0%) and Norway (-2.7%), posted losses greater
than 1%. Norway was impacted by the steep decline in oil prices.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index gained 1.2%, its third week
of gains during which it has risen about 6%. It is now within 1% of
52-week highs. With just one distribution day, it is due for consolidation
after rising in 20 of the past 25 days of trading.
Global Focus Emerging Long
Chinese markets pulled back this week, with the Shenzhen now
testing 10- and 40-week moving averages and the Shanghai testing
its 10-week moving average. One distribution day was recorded
during the week bringing the total to two. Markets are now sitting
at support levels and to remain constructive must continue to hold
near these levels. Increasing distribution going forward would
be a negative sign but conditions up until this point remains
constructive.
Global Focus Frontier Long
US Focus Long
The S&P 500 and Nasdaq rose for a fourth straight week, grinding higher in relatively light
volume. We did pick up one distribution day on the S&P 500 and two on the Nasdaq, but
overall the count still remains low. We continue to anticipate a pullback in the major averages
after such a sharp move higher. On the S&P 500, we would like to see 2120 hold, but
ultimately we view the rising 50-day moving average as a key support level. On the Nasdaq,
we view 5000 as a strong support level, but could see the index trading down to ~4970 while
still remaining constructive.
We are watchful of any meaningful rise in distribution if the market does end up pulling back,
but as of today, it is not a big concern. If the distribution day count remains low, we view any
potential move towards areas of support as a good buying opportunity. The Market remains in
a Confirmed Uptrend, now up 2.1% since the July 8 follow-through day.
European Focus Long
European markets continued to move higher, albeit at a slower rate than
the prior week, up almost 1% on average for the major indices. Five
countries, Portugal (+1.9%), Denmark (+1.5%), Finland (+1.4%), the
Netherlands (+1.3%), and Belgium (+1.1%), advanced 1% or more.
Countries that traded relatively flat, with gains less than 0.4%, included
Sweden (+0.3%), France (+0.1%), and Italy (+0%). Two other countries,
Norway and Switzerland, gained only slightly better, 0.4% and 0.5%,
respectively. No country was down for the week.
Global Focus Developed Long
The Australia ASX All-Ordinaries Index gained 1.2% this week,
building on last week’s 3.7% gain and moving further into 52-week
highs. The index picked up a distribution day on Friday, its first since
moving back into a Confirmed Uptrend last week.
Global Focus Emerging Long
Chinese markets finished down for the week, recording one
distribution day for the Shanghai but none for the Shenzhen.
Markets continue to trade constructively, particularly the
Shenzhen, which is trending above the 40-week moving
average, while the Shanghai remains less than 2% below it. A break
above the 40-week moving average for the Shanghai would be a
significant change in trend for the index, which has not traded
above it since August 2015.
